'Almost everyone gets a benefit' with the new Child Tax Credit of up to $3,600: Here's how and when parents will get payments

Many families can receive up to $3,600 per child thanks to new changes to the Child Tax Credit.


President Joe Biden signed the $1.9 trillion Covid-19 stimulus bill, known as the American Rescue Plan, Thursday afternoon. Among its many provisions, the legislation includes sweeping changes to the Child Tax Credit, which could start monthly cash payments to families as soon as July.

The American Rescue Plan institutes a fully refundable Child Tax Credit for 2021, increasing the maximum amount eligible parents can receive for simply having a qualifying child dependent to $3,000 per child ages 6 to 17 per year, or $250 per month. For children under the age of 6, the maximum credit equals $3,600 annually, or $300 per month.

The dramatic expansion of the credit would only last for one year under the American Rescue Plan, although Democrats are hoping to make the credit enhancement permanent.

The credit's overhaul will deliver cash to 93% of American children and cut the child poverty rate by half, according to Columbia University.

Here's what we know about how, and how often, the government might be able to send aid to parents under the bill.

Checks will be based on income

The amount of money Americans stand to receive as a Child Tax Credit will be based on their adjusted gross income. In other years, the Child Tax Credit has required parents have an annual income of at least $2,500 to qualify, but the expanded version for 2021 has no minimum income requirement.

Check out Grow's calculator to determine how much you could be eligible to receive.

The enhanced tax break would begin to phase out at adjusted gross incomes of $75,000 for individual taxpayers, $112,500 for head-of-household filers, and $150,000 on joint returns. Under the proposal, the IRS would look to the 2020 return to determine eligibility for the credit. If a 2020 return has not yet been filed, the IRS would look to 2019 returns. 

If you earn more than that, you would be eligible for a reduced payment. Wealthier families who may not qualify for the enhanced credit in 2021 can still claim the previous credit of up to $2,000 per child, which begins to phase out at $200,000 in income for a single or head-of-household filers and at $400,000 for married couples filing jointly.

To give you a better idea of how much families stand to receive from the potential credit enhancement, here's an example. A two-parent family with three children ages 11, 7, and 4 and a household income of $150,000 could get $800 per month from the IRS from July through December for a total of $4,800. Once they file their 2021 tax return next year, they could claim the remaining $4,800 in child tax credits.

The new Child Tax Credit is likely to have a widespread impact, says Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center: "Almost everyone gets a benefit with the increased tax credit."

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CTC payments will probably start going out in July

The American Rescue Plan calls for the IRS to send out periodic payments from July to December. It allows for up to half the credit to be paid out in advance, with the remainder claimable when you file your taxes next spring.

But dividing the 2021 Child Tax Credit into monthly installments may present logistical challenges. The payments might end up coming less frequently, says Maag. "My guess is they hope to get half of your CTC [Child Tax Credit] to you in July, and half would come when you file" your taxes next spring, Maag says.

Parents who don't want a monthly or periodic check will have the option to instead take a lump sum when they file their taxes next year.

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To get your tax credit fast, update your info with the IRS

Under the plan, the IRS is required to create an online portal that will allow taxpayers to update their income, marital status, and number of children who qualify for the credit. That portal will also allow people to opt out of the periodic payments if they want to take the full child credit on their tax return next spring.

Lawmakers have authorized $400 million to the IRS to help the tax agency distribute these payments quickly, but it's unclear whether or not the tax agency will be able to handle the tasks of getting credits out as frequently as the bill outlines.

To receive your benefits ASAP, Maag suggests that once the portal is active, you make sure the IRS has your latest information on file, including the number of dependents you have.

This story has been updated to clarify figures around the tax credit phaseout.

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